Archive for April, 2008

Alcoa Announces 50% Drop in Quarterly Profits

Monday, April 7th, 2008

Alcoa announced that its profits were 37 cents per share, down from 75 cents per share in the year-ago period. Analysts expected profits at 48 cents per share. Revenues were $7.4 billion, versus $7.9 billion during last year’s first quarter.
Officials cited the higher cost of energy and raw materials as well as the downtrend in the US Dollar for the decline in profits.
Alcoa is traditionally the first major company to announce its quarterly earnings, and is seen as an indicator of how the season’s reports will unwind.  Be careful how much you read into this stuff, though, as it’s often laden with hazy rhetoric. Consider the following conclusion from Marketwatch:
Alcoa’s report is seen as ushering in another rough period for corporate results, with earnings for S&P 500 companies seen declining 10.9% from the year-ago period, according to Wall Street targets. Still, that’s an improvement from the showing they made in the fourth quarter when earnings fell 25.1%, the worse quarterly performance since at least 1991.

Analyst estimates were that Alcoa’s profits would be down 36%; in reality they were down 50%. Analyst estimates are that S&P 500 earnings will be down 10.9%, and they will likely be lower in reality, possibly lower than last quarter’s -25.1%.

Financial journalists always have a way of making things seem better than they really are. I expect a bumpy ride this earnings season, and aim for capital preservation and risk aversion.

Fed Reports Increase in Consumer Credit

Monday, April 7th, 2008

The Federal Reserve released its consumer credit figures from January. Analysts were expecting an increase of $5.5 billion, while the increase actually came in at $5.1 billion.

Looking at the release, though, the numbers aren’t so rosy. The December figure was revised higher by $7 billion to $2.524 trillion. January’s figure was revised up $17 billion to $2.535 trillion, a 0.6% increase over January’s original reported figure.

February’s projected consumer credit is at $2.5397 trillion. Expect an upward revision next month.